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Stormy Weather
One year after its Makeover, a yacht brokerage struggles to stay afloat.
By Brian O'Reilly

(FORTUNE Small Business) – AT LEAST ON PAPER, IT'S NOT LOOKING GOOD FOR Zyachts, the boat brokerage network that received an FSB Make over last year ("From Sails to Profits," March 2006). According to the public company's annual 10-K filing for the fiscal year ended in September, "our financial condition and results of operations raise substantial doubt about our ability to continue as a going concern."

Brokerage income was up for the fiscal year, to $557,794, from $370,937 the year before. But Zyachts lost $736,990 last year, vs. $862,793 in 2005. The accumulated operating deficit climbed to more than $1.6 million. And the company had less than $23,000 in cash on its books as of September. What went wrong? The filing mentions that hurricanes and high fuel costs had put a damper on the boat biz and that management expected these ugly conditions to continue. But one of our consultants told Weller a year ago that his national network would add little value for consumers, who could already find boat listings online.

Weller insists Zyachts will break even in 2007. He has cut expenses, mostly by firing 20 high-cost brokers. Zyachts also shut down its offices near Atlanta and moved to cheaper digs in Lake Geneva, Wis. And that dire warning in the 10-K? Standard cover-your-backside language, according to Zyachts COO Jason Eck. "You've got to cover every possibility," he says. "I'm surprised we didn't warn investors I might become pregnant." This line in the filing may be harder to ignore: "We no longer pay salaries for management." Tough sailing, indeed.